2008 Budget Book - Kitsap County Government

Appendix A
Policies
for such insurance. Bond insurance will normally be purchased when the projected present value benefit is
greater than the cost of insurance. The projected present value benefit will be determined by comparing the
expected interest cost for financing both with and without insurance, when discounted by the expected interest
rate on the bonds.
Purpose, Type and Use of Debt
The issuance and management of debt, the County shall comply with the state constitution and with all other
legal requirements imposed by federal, state and local rules and regulations, as applicable.
General Obligation Debt is backed by the full faith and credit of the County and is secured by general fund
revenues and taxes collected by the County. General Obligation Debt should not be used for projects in Urban
Growth Areas of a city, unless agreements are entered into with the relevant city ensuring that taxes or other
resources will be available to pay debt service in the event of annexation. In cases where such agreements
are not entered into, the County will consider the use of assessment-backed debt if the project is determined
to provide a special benefit to the property owners.
Limited Tax General Obligation Debt (LTGO) is secured by regular tax levies and revenues, and includes all
types of obligations whether lease-purchase, financing contracts, loans, bond or other payment obligations.
Rental leases are not considered debt, but financing leases are. LTGO debt is subject to a statutory limitation
of 1.5% of the County’s assessed value.
Limited tax debt will be used for general county purposes, when a specified repayment source has been
identified through new revenue sources, expenditure reductions or increased revenue base, or in the event of
an emergency. The amount of limited tax debt outstanding will not exceed 50% of the statutory debt limitation,
unless there is unanimous agreement of the Board of County Commissioners to exceed this amount.
Unlimited Tax General Obligation Debt is payable from excess tax levies and is subject to voter approval. Any
proposition for UTGO debt must be approved by 60% of the voters casing a vote and the total number of
ballots cast must be at least equal to 40% of the total number of voters voting in the last general county or
state election (Chapter 39.40 RCW). Total GO debt (including limited and unlimited tax) is subject to a
statutory limitation of 2.5% of the County’s assessed value (Chapter 39.36.020 RCW).
Unlimited Tax Debt will be used for capital purposes, when the project has broad support by the County’s
residents, or the use of an excess tax levy is necessary for debt service payments.
Revenue Obligations are used to finance construction or improvements to facilities of enterprise systems
operated by the County, in accordance with a system and plan of improvements. The enterprise system must
be an established system legally authorized for operation by the County.
There are no legal limits to the amount of revenue bonds the County can issue, but the County will not incur
Revenue obligations without first ensuring the ability of an enterprise system to consistently meet any pledges
and covenants customarily required by investors in such obligations, during the term of the obligation.
Revenue bonds are generally subject to certain tests and requirements, including (1) establishment and
maintenance of a debt service reserve fund (generally equal to average annual debt service), (2) rates and
charges must provide net revenue after payment of operating expenses equal to a multiple between 1.1 and
1.5 times the debt service requirement, depending on the type and purpose of the enterprise and debt.
Additional covenants and pledges must be made for the benefit of bondholders.
Assessment-backed Obligations are used to finance projects that will provide special benefit to certain
property owners. The benefiting property owners are charged an assessment, based upon a formula
developed to fairly reflect the benefit received by each property owner in the assessment district. In the event
of annexation of property from the County, the property owners will still be responsible for payment of
assessments. There are detailed statutes for the formation of assessment districts and assessing property,
which contain specific timeframes for notice and conducting public hearings (Chapter 36.88 RCW).
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